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If a proposal to raise the state's minimum wage makes it on the ballot and is approved by voters this fall, workers will begin in January down a path that eventually leads to a pay rate of $9.50 an hour from the current $7.40.

That's led business groups to raise the prospect of fewer available low-wage jobs generally, but the biggest impact is likely to be in the restaurant industry and others where compensation is based on tips, and the minimum wage for tipped workers is $2.65.

Under the proposal, the state's "tipped" minimum wage would rise to $3.50 per hour on Jan. 1 and increase by 85 cents each year until it hits $9.50 an hour. The minimum wage for everyone else will bump to $7.90 an hour on Jan. 1, $8.40 on July 1, 2015, and $9.50 on Jan. 1, 2016. The rate could then be raised annually based on inflation.

If approved, Michigan would become just the eighth state in the country to equalize the tipped and non-tipped minimum wage and would be the only state east of the Mississippi to have done so.

"A voter would see it as a modest proposal," said Justin Winslow, vice president of government affairs for the Michigan Restaurant Association. "But it's really radical as to what it would do to the restaurant industry."

Frank Houston, chairman of the Oakland County Democratic Party and treasurer of Raise Michigan, which is working to put the proposal on the ballot, said the tipped minimum wage is an important piece that needs to be fixed. Raise Michigan is a coalition whose steering committee includes members from Mothering Justice, Center for Progressive Leadership, Metropolitan Organizing Strategy Enabling Strength, the Building Movement Project, National Employment Law Project, American Federation of Teachers, American Association of University Professors and Michigan United, a coalition of unions, churches and nonprofits.

Houston said waiters and waitresses are subject to volatility in the amount they receive in tips, which makes it hard to budget.

He also said it's a system that puts the onus on low-wage workers to go to their employers and prove tips did not meet the minimum wage. (If tips don't bring compensation to the minimum wage, employers are required to make up the difference.)

"We think that's a big part of what is broken," he said.

Two views

Joe Vicari, CEO of Warren-based Andiamo Restaurant Group, says a raise in the minimum wage for servers would be expensive.

On average, each Andiamo restaurant has 35 servers working an average of 30 hours a week.

If the hourly wage were to climb to $3.50, Vicari said it would cost an additional $892 in labor a week at each one of his 10 restaurants, or about $3,568 a month — or more than $35,000 monthly across the company.

"If I am on thin margins, then I would have to raise prices and cut staff," he said. "I have to do something to manufacture $3,500 more in sales at each restaurant because that's the difference between making money and not making money."

But Vicari said he understands why some servers need to make a higher wage than $2.65 an hour.

"If a restaurant is really slow and they aren't making tips, I can understand the need to make more," he said. "But if someone is making $1,000 a week in tips, they don't care about the $2.65. It's usually all eaten up in taxes anyway."

Vicari said the reality is that rising costs are passed on.

"The consumer is going to end up paying for it because the cost of doing business just went up," he said. "... Unfortunately, that's the only way I can see it."

Brian Parker, co-founder of Moo Cluck Moo

For Brian Parker, co-founder of Moo Cluck Moo, which has two restaurants in Canton Township and Dearborn Heights, the potential minimum wage increase is not a concern.

That's because the 12 employees he has start out at $12 an hour, and after 90 days of training and working, bump up to $15 an hour.

He said the concerns other restaurant owners have about layoffs and price increases are probably real, but he said he often notices that many restaurants have more people than they seem to need.

"Instead of having a dozen people standing around during down time, we have three or four. And during that time they are cleaning and prepping food," he said. "We have designed our restaurants to run efficiently and pay people more."

He said he supports the minimum wage increase proposal if it's affordable for businesses.

But Parker said, even though he wants people to make a living wage, he would prefer if that came without a legal mandate.

Not just teenagers

According to data last fall from the National Employment Law Project, more than 53,000 people work at fast-food restaurants in metro Detroit.

And they're not just teenagers flipping burgers at their first job, said Yannet Lathrop, policy analyst at the Michigan League for Public Policy, a nonprofit advocacy group for low-income workers. It's more often the case the individual is an adult using that wage to help support a family.

In Michigan, according to a study her organization conducted, more than 85 percent of minimum-wage workers are over the age of 20 and have earned a high school diploma.

But Wendy Block, director of health policy and human resources for the Michigan Chamber of Commerce, said for many, a minimum wage job is their entry into the workforce, and if the minimum wage is increased it will lead to fewer of those job opportunities, hurting the economy in the short and long term.

It's not just the cost of the minimum wage itself, she said. Employers will also have the added expense of paying higher state and federal unemployment taxes, higher workers' compensation costs and higher Federal Insurance Contributions Act taxes, because they are based on wages.

Charles Ballard, Michigan State University

War of studies

Charles Ballard, an economics professor at Michigan State University, said the number of employees making the minimum wage is not large for most businesses.

"The wages that go to this group of workers is a small fraction of the total labor costs," he said.

But if the rate were increased, Ballard said, some people will lose jobs and prices could rise, as well as a potential squeeze on profits, but it's hard to tell if that's what happened in 2006 when the minimum wage was last raised here.

"The only way economists can squeeze the truth is if there is variation in some source of data," Ballard said.

And so Michigan moving from $7.15 an hour to $7.40 an hour was not a large enough increase to isolate the effect.

The largest increase occurred in 1950, Ballard said, when the rate went from 40 to 75 cents. And after that, the unemployment rate dropped, but he said that was because of the Korean War, making it difficult to say what impact the wage increase had.

Lathrop said employers will have time to make arrangements and plan for the wage increases, due to the staggered increase designed into the proposal.

Wendy Block, Michigan Chamber of Commerce

"This will not be a direct hit to employers right away," she said.

Block said studies she has seen, and discussions with chamber members, have proven the negative effects to her, but she knows there will always be disagreements over it.

"You can have a war of studies all day long on this issue," Block said. "This isn't a black-and-white issue."